Almost as an afterthought to its March 2010 proclamation that manufacturer compliance with new expanded in-plant regulation originally billed as voluntary would, henceforth, be \u201cnot voluntary,\u201d HUD has recently announced that it intends to proceed with a new rule that would institutionalize that expansion and, at the same time, substantially alter existing regulations defining the pivotal relationship between third-party Primary Inspection Agencies (PIAs), manufacturers and HUD.\u00a0 What is worse, is that HUD plans to institute rulemaking on this major and costly alteration of the existing in-plant regulation structure without a consensus of the Manufactured Housing Consensus Committee (MHCC) and without even presenting a complete proposal to the MHCC as required by law and as requested by the MHCC itself.\u00a0 Indeed, the story of how this has come about is a textbook reflection of HUD\u2019s efforts over the past decade to minimize, circumvent and evade the program reforms of the Manufactured Housing Improvement Act of 2000, and a case study for Congress when it examines the Department\u2019s failure to fully and properly implement that law.<\/p>\n
Back in 2008, HUD approached the MHCC with \u201cconcepts\u201d for changing the fundamental role of third-party PIAs (and particularly private PIAs) as well as the nature of their relationship with both manufacturers and HUD.\u00a0 These \u201cconcepts\u201d ultimately led to HUD proposed revisions to elements of the Procedural and Enforcement Regulations (PER), that were presented, in piecemeal fashion, to the MHCC Regulatory Enforcement Subcommittee.\u00a0 That process, however, was halted by a vote of the Subcommittee in September 2008, based on MHARR objections that the consideration of piecemeal proposals \u2013 that did not allow a complete evaluation of the interaction between various components \u2013 was improper, as was the consideration of such proposals without relevant cost information or justification as required by the 2000 law.<\/p>\n
Confronted with this rejection, HUD responded with a three-pronged strategy.\u00a0 First, beginning in late 2008, it embarked on a campaign to expand and fundamentally change in-plant regulation on the ground, without first complying with the due process requirements of the 2000 law, based on an elaborate series of \u201cenhanced checklists,\u201d \u201cfield guidance\u201d documents and \u201cstandard operating procedures\u201d that were not \u2013 and still have not been \u2013 presented to the MHCC for consensus review or published for notice and comment rulemaking.\u00a0 Initially, and for nearly a year-and-a-half afterward, HUD characterized the major changes implemented by these documents as a process of \u201cvoluntary cooperation,\u201d only to ultimately deem them \u201cnot voluntary\u201d in March 2010.\u00a0 An August 24, 2011 article in the Capitol newspaper \u201cThe Hill\u201d aptly describes this type of process (being used increasingly by regulators), stating: \u201cTh[e] new guidelines are\u00a0 supposedly \u2018voluntary,\u2019 but don\u2019t be fooled.\u00a0 The federal government \u2026 has long been engaged in an egregious and unconstitutional regulatory power grab.\u00a0 The strategy simply is to saddle disfavored industries with regulations disguised as \u2018voluntary,\u2019 and therefore not subject to the normal rulemaking process and judicial review.\u201d\u00a0 Although written about a different set of \u201cvoluntary\u201d guidelines, the same logic and analysis holds here.<\/p>\n
Second, in 2009, HUD returned to the MHCC with a unified regulatory proposal to amend the PER regulations in a way that would legitimize and provide legal support for such \u201con the ground\u201d expanded in-plant regulation.\u00a0 In a formal September 2009 letter ballot, however, HUD was unable to secure an MHCC consensus on this proposal, specifically due, as reflected by MHCC minutes, to the Department\u2019s failure to provide the Committee with adequate justification showing the need for such changes, as well as its failure to provide concrete information regarding the cost-impact of its proposal.<\/p>\n
Third, when MHARR continued its objections to the \u201con the ground\u201d imposition of such a costly regulatory expansion without compliance with relevant due process protections, HUD, on February 5, 2010, issued an \u201cinterpretive rule,\u201d without opportunity for public comment, designed to ensure that the MHCC would never get an opportunity to review its expanded in-plant regulation checklists, \u201cfield guidance\u201d and standard operating procedures, by simply reading catchall section 604(b)(6) \u2013 requiring MHCC consideration and related rulemaking for any change in \u201cinspection practices\u201d \u2013 out of the 2000 law.<\/p>\n
Now, HUD is taking the next step to institutionalize expanded in-plant regulation.\u00a0 As announced by HUD regulators at an August 17, 2011 meeting of the MHCC\u2019s Regulatory Enforcement Subcommittee, the Department plans to go forward with a proposed rule relating to the role and activities of the PIAs without further consultation with the MHCC, despite the absence of an MHCC consensus due to HUD\u2019s own failure, in 2009, to provide justification and cost information that the MHCC is required to consider by the 2000 law.\u00a0 Questioned about this procedure, HUD\u2019s representative stated that the MHCC had \u201chad its chance\u201d in 2009.<\/p>\n
This stance, however, flouts (once again) the requirements of the 2000 law. Section 604(b) of the law requires that the MHCC consider every proposed PER regulation, absent a declared emergency.\u00a0 Further, section 604(e) of the law requires that the MHCC consider the cost-impact and justification for any such proposed regulation.\u00a0 The MHCC, however, has never been provided with this requisite information by HUD.\u00a0 As a result, there are two possible scenarios in this matter, both of which violate the 2000 law \u2013 (1) if HUD\u2019s new proposal is in any way different from the proposal that failed to attain an MHCC consensus in 2009, then it has never been considered by the MHCC and violates section 604(b); (2) if the new proposal is identical to the 2009 proposal, it still has not been properly presented to and considered by the MHCC in accordance with the law, because mandatory elements required for MHCC consideration in accordance with the law \u2013 cost-impact data and a showing of justification \u2013 were never provided.\u00a0 Put differently, if HUD\u2019s position were correct, the Department could effectively evade the consensus requirements of the 2000 law on every proposal simply by refusing to provide the MHCC with cost-impact, justification, or other\u00a0 information needed or required for MHCC review and consensus comments.<\/p>\n
HUD, in an attempt to minimize this further restriction of the role and authority of the MHCC and its own obligation to comply with the due process requirements of the 2000 law, noted that Committee members could submit comments during the public comment period on the proposed rule, but this misses the central point of the MHCC and the 2000 law \u2013 that regulatory changes should be based on the consensus agreement of all program stakeholders.\u00a0 And there is not \u2013 and never has been — a consensus on any changes relating to the role of the PIAs or an expansion of in-plant regulation.\u00a0 Simply stated, a federally-regulated industry that has lost more than 80% of its production over the past 12 years, should not allow this kind of incremental evasion of the law.<\/p>\n
In MHARR\u2019s view, this proposal, a vestige of prior program management that sought to minimize and bypass the reforms of the 2000 law, should be withdrawn by the new program management and re-submitted to the MHCC, this time with proper cost-benefit information and specific justification \u2013 if one exists.<\/p>\n